The governor of the Bank of England has pointed out that Britain’s recorded economic growth in the second quarter of 2012 will be depressed by the plethora of bank holidays. Within three months there is a four-day weekend for Easter, a May day break and another four-day weekend to mark the Queen’s diamond jubilee.
Still, the news is not all bad: output will be boosted in the following quarter by expenditure associated with the London Olympics. The governor’s purpose – he can have had little hope of success – was to pre-empt speculation by financial commentators who perceive significance in 0.1 per cent fluctuations in reported output.
But for the Centre for Economic and Business Research (CEBR) the matter is more serious still. The publicity-conscious consultancy took advantage of the dearth of news over the last bank holiday to question whether Britain would be better off with fewer such events. It claimed the British economy would be boosted by having less of these collective celebrations, suggesting normal bank holidays should be spaced out a bit better over the year.
We will have nine bank holidays this year, including one extra for the jubilee. Although what is meant by a public holiday varies from country to country and within regions of many countries, 10 to 12 is about the international norm. But still the question remains. In this time of austerity, would it not be a good thing if we all agreed to forgo some leisure? We could surely relinquish New Year’s day and Easter Monday for the benefit of the economy?
Gross domestic product is a complex statistic, which is variously estimated by adding up the totals of the value of the output of businesses, the incomes of employees and corporations, and the expenditures of households and the investment of firms. The effect of the jubilee on these totals is quite hard to assess.
Trains and buses will run and people will go on becoming ill. Banks will be shut but, while people may trade fewer derivatives, our salaries and bills will still be processed when the banks reopen. Journalists will mostly have the day off, but will still be paid: freelance columnists will not, but photographers will be busy. Angela Hartnett will be cooking for her street party but she will not be in the kitchen at her Murano restaurant. Ms Hartnett’s substitution of unpaid for paid work – there will be a lot of that over the jubilee – affects the statistics but not much else: all economics students used to learn of the man who reduced GDP by marrying his housekeeper.
One could analyse these effects indefinitely, but the only thing to be gained from the exercise would be insight into the conventions of national accounting. Measuring output is of interest only as a step on the road towards measuring something else. We could look at the impact on the public finances. But the direct costs of the jubilee are a few million and most revenue from the principal taxes – income tax, national insurance and VAT – will be collected anyway. In the context of annual spending of £700bn and a trillion pounds of debt the effect is negligible. We could measure the impact of the jubilee on the balance of payments. The issue is whether the loss of output of exported services and manufacturers exceeds the spending of the foreign tourists who come to London for the show.
Why bother? After all, we could raise GDP further by cancelling Christmas (though we would lose the expenditure on unwanted gifts), taking shorter vacations (though think of the impact on easyJet), and by working till we drop from exhaustion. But why would we want to? The idea that there is something called “the economy”, which is separable from the welfare of society and its citizens, is silly. There isn’t. What really matters is whether the holiday, and the celebration, makes us better off. That question answers itself without need of economic statistics.